1

A PROJECT
ON
A STUDY ON RETAIL BANKING

OPTIONAL SUBJECT: COMMERCIAL BANK MANAGEMENT

SUBMITTED TO
UNIVERSITY OF MUMBAI

FOR SEMESTER I OF
MASTER OF COMMERCE
(BANKING & FINANCE)
BY
(KHUNDONGBAM SURESH SINGH)

UNDER THE GUIDANCE OF
DR. M.K. DEKATE
ASSOCIATE PROFESSOR
YEAR: 2014 - 2015
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DECLARATION BY THE STUDENT

I KHUNDONGBAM SURESH SINGH student of m.com part I roll number
_____hereby declare that the project for the paper COMERCIAL BANK
MANEGEMENT submitted by me for semester- i during the academic year 2012-
2013, is based on actual work carried out by me under the guidance and
supervision of Dr. M.K. Dekate.
I further state that this work is original and not submitted anywhere else for any
examination








Signature of Student
KH SURESH

3




EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated the project on
A STUDY ON RETAIL BANKING submitted by KHUNDONGBAM SURESH
SINGH Student of M.Com Part-I.
This project is original to the best of our knowledge and has been accepted for
Internal Assessment







Internal Examiner External Examiner Head Of The department


4




Internal Assessment: Project 40 Marks
Name of student Class Division Roll
number
First name :
Father name:
Surname :


M.COM
PART - I


Subject: COMMERCIAL BANK MANAGEMENT
Topic for the Project: A STUDY ON RETAIL BANKING

Marks Awarded Signature
Documentation
Internal Examiner
(Out Of 10 Marks)

External Examiner
(Out Of 10 Marks)

Viva And Interaction
(Out Of 10 Marks)


TOTAL MARKS (Out of 40)


5




ACKNOWLEGEMENT
I hereby express my heartiest thanks to all sources who have contributed to the
making of this project. I oblige thanks to all those who have supported, provided
their valuable guidance and helped for the accomplishment of this project. I also
extent my hearty thanks to my friends, our professor and all the well wishers.

I also would like to thanks my project guide Dr. M.K. DEKATE for his guidance and
timely suggestion and the information provided by him on this particular topic.

It is matter of outmost pleasure to express my indebt and deep sense of gratitude
to various person who extended their maximum help to supply the necessary
information for the present thesis, which became available on account of the
most selfless cooperation.
Above all I sincere thanks to the UNIVERSITY OF MUMBAI for which this project is
given consideration and was done with outmost seriousness.




6




CONTENTS
SL.NO. PARTICULAR PAGE NO.
CHAPTER 1- INTRODUCTION
CHAPTER 2














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EXECUTIVE SUMMARY
In recent years, the financial services industry has been characterised by increased global
competition, the transition from paper-based to electronic products, and a raft of regulatory
changes. The relentless march of technology has allowed banks to extend the scope of their
activities and increase their operational efficiency, automating critical functions such as credit
checking and loan approvals. At the same time, the rapid growth of electronic payments has
exposed the weaknesses of complex legacy batch-processing systems and prompted the adoption
of new technologies that store and transfer critical information in real time. This digital
revolution is also presenting new challenges in terms of ensuring data security and protecting
customers from fraud across multiple service-delivery channels. Against the backdrop of rapid
technological progress, the changing behavior of customers and target customers has become a
critical consideration for banks. As the cost of PCs, processing power and memory continue to
fall, customers are increasingly interacting with banks in a virtual world, as well as through more
traditional channels such as branch visits and contact centre calls. As a result, banks that fail to
innovate and compete effectively across all channels may risk losing market share to a new
generation of tech-savvy competitors. In this environment, technological innovation is
recognised as a key differentiator among banks today. Institutions in the west increasingly use
technology, such as customer segmentation and accessibility Software, to tailor services to the
needs of specific customer groups, including older people, young people, or people with
disabilities. At the same time, banks in emerging markets are exploring the potential of online
and telephone Channels to deliver services to rural, geographically-distributed populations in the
most cost-effective way possible.
The Retail Banking environment today is changing fast. The changing customer taste and
preference improved service and banking convenience. Higher penetration of technology and
increase in global literacy levels has set up the expectations of the customer higher than never
before. Increasing use of modern technology has further enhanced reach and accessibility. The
market today gives us a challenge to provide multiple and innovative contemporary services to
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the customer through a consolidated window as so to ensure that the bank's customer gets
"Uniformity and Consistency" of service delivery across time and at every touch point across all
channels. The pace of innovation is accelerating and security threat has become prime of all
electronic transactions. High cost structure rendering mass market servicing is prohibitively
expensive.
Present day tech-savvy bankers are now more looking at reduction in their operating costs by
adopting scalable and secure technology thereby reducing the response time to their customers so
as to improve their client base and Economies of scale. The solution lies to market demands and
challenges lies in innovation of new offering with minimum dependence on branches:- A multi-
channel bank and to eliminate the disadvantage of an inadequate branch network. Generation of
leads to cross sell and creating additional revenues with utmost Customer satisfaction has
become focal point worldwide for the success of a Bank.












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Overview of Indian banking industry
Indian Banking industry is one of the most technologically advanced industries with vast
networks of branches empowered by strong banking systems, their wide range of product and
effective distribution channel capabilities. However, regulatory, structural and technological
factors are significantly changing the banking enviro0nment throughout the world. One of the
most important factors that are motivating the growth of the Indian banking institutions is the
liberalization. The financial sector reforms in India were designed to infuse greater competitive
vitality in the banking system. To achieve this objective, the Narsimhan Committee was
formed. The Narsimhan Committee report suggested wide ranging reforms for the Indian
banking sector in 1992, including the important one to introduce internationally accepted
banking practices so as to enable Indian banks to achieve service excellence. The Committee
recommended a liberal policy towards the entry norms of private sector banks and foreign banks
into the Indian banking sector.
The Interest rate structure has been deregulated to a great extent and banks have been given a
great degree of freedom in determining their rate structure for deposits and advances, as well as
their other product range. Banking has also become more competitive in respect of branch
network. The end result is that market power is getting shifted from banks to their customers.
Financial liberalization has led to intense competitive pressures, and retail banks are
consequently directing their strategies towards increasing customer satisfaction and loyalty
through improved service quality. With such a high potential in the Indian banking industry, all
leading banks are looking ahead to establish themselves as the most preferred bank by the
customers and this can only happen when they are able to differentiate themselves on the basis of
service quality being offered by their competitors. Retail Banking has immense opportunities in a
growing economy like India. As the growth story further unfolds in India, retail banking is going
to emerge a major driver of economic growth. A.T. Kearney, a global management consulting
firm, recently identified India as the second most attractive retail distribution center of 30
emergent markets.
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Dhandapani Alagiri (2007) in his article entitled as, Retail Banking: Challenges has focused on
the Retail banking with increased consumer spending and increased challenges in the form of
competition and technological upgrade that comes along. Product innovation and competitive
packaging services are the most important issues for the new generation customers. It has
increased the uses of the mobile and e-banking facilities, security and confidentiality have
become very difficult to maintain and that has become a major challenge for the banks. The
study emphasized that credit delivery mechanism improved considerably with the advent of
technological advances and more methodical credit evaluation and credit scoring models. The
study also dwells on the implications of Basel II for retail banking
S.Venkata Seshaiah & Vunyale Narender (2007) in their study entitled as, Factors Affecting
Customers Choice of Retail Banking, have identified various factors affecting customers
choice and study consumer behavior with respect to the peoples choice of retail banks. In this
study efforts have been made to go deep into the psychology of the customers loyalty. Through
a survey is different factors have been identified (1) Safety of deposits (2) size and strength (3)
Accuracy (4) General Survey Quality (5) Speed of delivery (6) proximity (7) Security of
Environment (8) Cordiality of staff (9) Price & services charges (10) Product packaging (11)
General Public Impression (12) Peer Group Impression (13) Face lift (Structural) (14) Friendship
with staff (15) advertising & Publicity. The findings showed that retail banking must reorganize
their activities to achieve their corporate mission through customer orientation.
Sudhir (2005) in his study entitled as, Growth Pattern of Retail Banking emphasizes that
existing potential of Retail Banking was untapped in rural and semi-rural areas and that untapped
clientele provided a good and vast opportunity for growth in this segment
Tapan K. Panda & Bivraj Bhushan Parida (2006) in their study entitled as Customer
Relationship Management in Retail Banking in India talk about the implementation of CRM
principles in Retail banking sector, analyze the need for drivers of CRM implementation and the
challenges associated with illustration of HDFC Bank and PNB. The article discusses the retail
banking challenges like customer retention and finding new customers and the need for
implementing CRM in this sector. The study revolved around the perception that the CRM has
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opened a new path to the world of customer intelligence. In todays environment business
decision & strategies are made looking at the proximity to customers.
INTRODUCTION TO THE CONCEPT:
RETAIL BANKING AN INTRODUCTION
Retail banking is typical mass-market banking where individual customers use local branches of
larger commercial banks.
Retail banking refers to banking in which banking institution execute transactions directly with
consumers, rather than corporations or other banks. Services offered include: savings accounts,
mortgages, personal loans, debit cards, credit cards and so forth or it is a typical mass-market
banking where individual customers use local branches of larger commercial banks. Drivers of
Retail Growth:
Growing disposable incomes
Increasing literacy levels
Higher adaptability to technology
Growing consumerism
Changing mindsets-willingness to borrow/lend
Retail banking has become a very important component in the business mix of banks. Retail
banking offers multiple comfort factors for banks to do business. Large and divergent customer
base across income segment offers huge scope for banks to develop and offer multiple products
and services. In addition to traditional products and services offered by banks over the years, the
retail model has undergone rapid innovation in the past decade with regard to products,
processes, people and technology.
Technology has become the driver for retail banking explosion, and technology products like
ATM, Internet Banking, Mobile Banking, Card products like Debit Cards and Credit Cards and
remittance products like RTGS and NEFT are making their presence felt in retail space. Banks
are embracing different strategies, redesigning their conventional business silos, reengineering
their channels, product and services to increase the share of customer wallet.
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A bank functions can be divided into various divisions like:
Retail/Personal Banking: This division provides a range of financial services to individual
customers and small companies. It operates mainly through branch networks. Retail banking
includes routine transactions like deposits and withdrawals of money; money transfer; foreign
currency exchange and travelers cheque encashment. They also deal with personal and small
loans, credit and mortgages; insurance policies; investment schemes; pension funds; and advice
to customers on various financial matters. Apart from offering home loans, car loans, educational
loans, consumer loans, etc. they also develop various deposit schemes and help people fill their
offers.
Corporate Banking:
They deal with medium to large-scale companies and government agencies. It could start at the
local branch manager level, though more complex dealings are routed through corporate
divisions of clearing banks and their merchant banking subsidiaries. Corporate banking deals
with credit and advances, trade finance, foreign exchange management, asset management, lease
financing of heavy equipment, infrastructure, machinery, credit risk assessment, etc. They also
advise clients on matters such as corporate mergers and acquisition, raising capital and business
strategy regarding competitors and outside factors.
Merchant Banking:
Investment management is the primary activity of this group. It could be on behalf of corporate
clients, or institutional investors-like pension funds, investment trusts, or those in the securities
business. This groups also handles public issue and marketing of shares, debentures and other
such papers. It may also include other stock market functions like dematerialization services,
investment advisory services, etc. Merchant banking executives research into capital market,
advice and manage funds of various corporate and individual customers.

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Treasury group:
This group takes care of the total funds of a bank including foreign exchange reserves.
Responsibilities include bank portfolio management, dealing in foreign currency, etc. There are
Forex (foreign exchange) dealers in this group who exclusively deal with the foreign market.
They buy and sell foreign exchange at the minimum exchange cost thereby earning maximum
profit from the transactions.
Rural Banking:
This group deals with the banking and credit needs of people in the rural sector. Not all banks
have this group and some banks have separate subsidiary companies for rural banking.
Product Management: This group conceptualizes various banking services and then develops;
implements and manages them. They have the responsibility for a banking product (meaning
services like personal loans, home loans, credit cards, loans against shares, educational loans,
etc.).
Apart from these main functional groups, there is an appraisal group to analyse economic
feasibility of industrial projects, the bank's exposure to financial risk and long term returns.
There are internal auditors who audit the bank's internal books of accounts.
There are various groups of professionals like lawyers, engineers, agricultural scientists,
chartered accountant, company secretary, cost accountant and economists who work in various
departments in advisory capacities. They help make decisions on issues that are legal, technical
or economic in nature. For example, the economist advises various functional groups on the
implications of the Union budget on the business of the banks, consumer buying pattern, etc.



14




INDUSTRY PROFILE
INDIAN BANKING SECTOR
The Indian Banking Sector is quite different from the banking system in the rest of Asia, because
of the distinctive geographic, social and economic characteristics of the country. India is the
second most populated nation in the world; it has marked economic disparities and high levels of
illiteracy.
The country followed a socialist approach for well over 4 decades after independence till the
government initiated the economic reforms through the policy of liberalization. The banking
structure in India is therefore a reflection of the countries socialistic set up. It had to meet the
goals set by the five year plans, especially with regard to equitable distribution of wealth,
balanced regional economic growth and removing private sector monopolies in trade and
industry.
The government nationalized the banks in 2 different phases (1969 and 1980). On July 19, 1969,
14 major banks of the country were nationalized and on 15th April 1980, six more commercial
private sector banks were taken over by the government. As a consequence the banking system
in India concentrated on the domestic sector; very few banks in India had a presence
internationally. The nationalized banks had a social obligation of taking the banking sector to the
people by expanding the branches and by getting more people to open an account.
SCOPE FOR RETAIL BANKING IN INDIA
It is reported that Indian retail market has the potential to be second only to the USA. National
Readership Survey 5 puts Indian households with monthly of over Rs. 5000 at 4.5 million.
According to the survey, the category of households with annual income of Rs. 2 lakhs and
above is growing at the rate of 30 per cent per annum. No wonder, banks with vision and insight
are trying to woo this market through a series of innovative additions to their products, services,
technology and marketing methods. Fixed and unfixed Deposits, (cluster deposits which can be
15


broken into smaller units to help meet depositors overdraft without breaking up entirely),
centralised database for any branch banking (whereby the customer can access his account in
any of the branches irrespective of where the account is maintained), room services (whereby the
customers are visited at their residences offices to enable them to open their accounts), automatic
teller machines, tele-banking network, extended banking time, courier pickup for cheques and
documents, etc. are some of the privileges extended to the customers by the banks in are
eagerness to cultivate the retail market. In short, in the bold new world of retail banking the
customer is crowned as king.
RETAIL BANKING-A COOL OASIS
Retail banking is much more than as opportunity to addressing dwindling margins. It is an
imperative to preserve profits and market positions. Customers now have many more personal
financial options, a growing credit culture, a willingness to switch between financial services
providers, and a demand for lower interest rates. As they witness these trends, banks realize that
they cannot remain passive. The new private sector banks are making inroads in the markets they
serve, while competition from non-banks is growing. In respect, older institutions need to
revamp their distribution capabilities, customer management capabilities, operating culture,
compensation system and operations processing.
The bankers struggling through the shifting sands of corporate credit, retail banking looks like a
cool oasis. Corporate Credit, retail banking looks like a cool oasis. Corporate customers rely less
on commercial banks every day as other fund raising avenues present themselves. As this
disintermediation takes place and competition shrinks margins, retail banking has gained an
irresistible allure for banks because of its apparently higher margins and potential for growth.
With their large branch networks, banks have secured sizeable deposits 23% (Percent) of GDP.
On the assets side, however, retail advances account for a mere seven per cent of total lending.
The penetration of products like car loans or credit cards is very low. With very few focused
multi-line banks, non-banks are often significant players in retail lending, as HDFC is in house
loans. Yet, many non-banks lack the minimum size to make the necessary investments and
address the challenges of retail banking.
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A large number of banks have launched or relaunched retail products and are attempting to grow
their share of the personal financial services market. Even the term lending institutions have
decided that they need to go retail to raise funds. Many organization like ICICI are betting that a
large part of their future growth will come from retail customers. Increase in economic activity,
increase in the purchasing power. The rural areas have the large purchasing power at their
disposal and this is an opportunity to market Retail Banking. India has around 200 million
households and 400 million middleclass population more than 90% of the savings come from the
house hold sector. Falling interest rates have resulted in a shift. "Now People Want To Save Less
And Spend More."
Nuclear family concept is gaining much importance which may lead to large savings, large
number of banking services to be provided are day-by-day increasing. Tax benefits are available
for example in case of housing loans the borrower can avail tax benefits for the loan repayment
and the interest charged for the loan.
POTENTIAL FOR RETAIL IN INDIA: IS SKY THE LIMIT
The Indian players are bullish on the Retail business and this is not totally unfounded. There are
two main reasons behind this. First, it is now undeniable that the face of the Indian consumer is
changing. This is reflected in a change in the urban household income pattern. The direct fallout
of such a change will be the consumption patterns and hence the banking habits of Indians,
which will now be skewed towards Retail products. At the same time, India compares pretty
poorly with the other economies of the world that are now becoming comparable in terms of
spending patterns with the opening up of our economy. For instance, while the total outstanding
Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The
comparison with the West is even more staggering. Another comparison that is natural when
comparing Retail sectors is the use of credit cards. Here also, the potential lies in the fact that of
all the consumer expenditure in India in 2001, less than 1% was through plastic, the
corresponding US figure standing at 18%.
It also had to play a supportive role to other sectors of the economy like agriculture, small scale
industries and exports.

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PRODUCT AND SERVICES PROVIDED BY BANKS
PERSONAL BANKING
Personal banking of Indian Overseas Bank is further divided into these main categories:
Saving Bank
Current Account
Term Deposit
Retail Loans
Home Loans and Mortgages
Depository Services
ABSA (Application Supported by Block Amount)
International VISA Cards
Insurance and Mutual Funds
Real Time Gross Settlement (RTGS)
Pension Payment Scheme
Saving Scheme
DEPOSIT PRODUCTS
Saving Bank Account
Term Deposit
NRI Accounts
IT Products
Insurance Products
Tax Saver Products
Retail Credit Schemes

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Retail Credit Schemes
Home Loan Scheme- Subha Gruha
Housing Finance scheme for resident individuals up to Rs.500 Lakhs.
Margin - 20%. Repayable in 20 years for purchase / construction of new / old houses / flats.
Holiday period up to 18 months for construction and 3 months for purchase.
Interest rate depends on the size of the loan and repayment period.
Security - Mortgage of house.
Home Improvement Scheme
Loan scheme for repair / renovation / up gradation of existing houses to individuals in service,
profession, trade. Loan amount - up to Rs.10 Lakhs
Repayable in 120 EMI with a holiday period of 3 months.
Security: Mortgage of property being repaired or any other unencumbered property with market
value twice that of the loan amount.
Vehicle Loan Scheme- Pushpaka
Car finance scheme for purchase of new as well as used car and 2-wheeler.
90% of cost of new car and two-wheeler and 75% of market value of used car financed against
hypothecation of vehicle.
Higher amount of loan for used car considered on case to case basis.
Repayment - 60 EMI for new cars and 36 EMIs for used cars..
Clean Loan
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Loan for salaried employees to meet personal and domestic expenses
Quantum of loan 10 times monthly salary / 10 lac whichever is lower
For LIC agents up to Rs 5 Lacs
Repayment 60 EMI for 10 times salary and 36 EMI for others
Undertaking letter from the employer to deduct from the salary ,loan installments every month
and remit to bank to be produced.
Pensioners Loan
All pensioners excluding Malaysian Government pensioners receiving pension through our
bank branch are eligible.
The loan amount is restricted to 10 months pension with a ceiling of Rs.2.00 lakhs for those not
over 65 years of age and Rs.1 lakh for those who are over 65 years of age.
Repayable out of pension amount in 48 EMI for those not more than 65 years and 36 EMI for
those over 65 years.
Home Loan for NRIs
Loan scheme for Non-resident Indians / Persons of Indian Origin with monthly income not less
than Rs.10, 000/, to buy / construct house / flat in India.
Maximum loan - Rs. 500 Lakhs or 80% of the cost.
Repayable in 15 years.
Security - Mortgage of property.
Sahayika Loan
Loan to meet expenditure on social financial commitments
Applicant should be an individual in employment or business / professional or
Self-employed with regular income.
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Maximum loan amount - Rs.5 Lakhs.
Security and margin: NSC, LIC, ULIP etc. = 25%, Life policies = 10%,
Immovable property = 50%.
Repayment - 48 equated monthly installments. No holiday period.
Sanjeevini Loan
Loan Scheme for registered medical practitioners for construction of nursing home, hospitals,
purchase of equipment, vehicle, ambulance etc.
Maximum loan - Rs.2 crore in Metro/urban area, Rs.50 Lakhs in semi-urban area and Rs.10
Lakhs in rural area.
Margin - 15-25% for purchase of equipment, 25-30% for construction of nursing home.
Repayment 5 - 7 years.
Educational Loan Vidya Jyothi
Loan scheme to students for education in India and abroad.
Maximum Loan amount - Rs.10.00 Lakhs for study in India and Rs.20.00 Lakhs for foreign
study.
Repayable in 5- 7 years, after completion of studies.
No collateral security for loans up to Rs.4 lac.
IOB Akshay
Loan against life policies of LIC and other private insurance companies approved by IRDA.
Maximum loan amount - 90% of surrender value in the form of CC/DL/TOD.
Repayment - 36 EMI.
Easy Trade Finance
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Hassle free advance to retail traders, who can be individuals, proprietary, partnership or
company.
Insurance of stock, submission of stock statement etc. are not insisted.
Maximum advance - Rs.300 lakhs.
VARIOUS RETAIL LENDING SCHEMES
Rate of Interest under Retail Credit Products. (as on 31st May 2014)
SNO Name of scheme Interest
rate%
1 Pushpaka-loan 10.75%
2 Sahayika-loan to meet social financial commitments 14.00%
3 Sanjeevini - loan to medical practitioners for setting up nursing homes/hospitals and
for purchase of equipments



12.00%
12.50%
4 Pensioners' loan Scheme - loan to pensioners for meeting immediate emergency needs 14.25%
5 Home Dcor - loan for furnishing your home 13.00%
6 Liquirent - loan against future rent receivables



13.00%
13.50%
7 Akshay - loan against life policies of LIC and private insurers approved by IRDA 14.00%
8 Vidya Jyothi - loan for pursuing higher education
Up to Rs. 4 Lacs
Above Rs. 4 lacs to Rs.7.50 lacs
Above Rs.7.50 lacs
Ward of Staff
Vocational Courses

12.25%
13.50%
13.25%
12.00%
12.25%
9 Clean Loan - loan to employees of reputed organizations to meet personal expenditure 15.25%
10 Easy Trade Finance - Hassle free working capital finance and term loan to retail
traders: Working Capital: Term Loan:

13.25%
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12 Jewel Loans 11.75%
13 Home improvement 10.25%



WORK FLOW MODEL
DEPOSITS

Customer Approaching the Bank/Enquiry

Introduction

Documentation

Saving, Fixed, Current and Recurring Account

A/C holder facility

Deposits Withdrawal

Cashier Cashier

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Cash supervision Cash supervision

Account for the customer_____________

PROCESS OF OPENING AN ACCOUNT OPENING
Choose an Institution
Go to the Bank or Website
Pick the Product You Want
Provide Your Information
Agree to Terms
Print, Sign, and Mail (If Applicable)
Congratulate Yourself!




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MCKINSEYS SEVEN S MODEL
MCKINSEYS SEVEN S MODEL AS APPLICABLE TO

The Seven-S is a framework for analysing organizations and their effectiveness. It looks at the
seven key elements that make the organizations successful, or not: strategy; structure; systems;
style; skills; staff; and shared values.
Consultants at McKinsey & Company developed the 7S model in the late 1970s to help
managers address the difficulties of organizational change. The model shows that organizational
immune systems and the many interconnected variables involved make change complex, and that
an effective change effort must address many of these issues simultaneously.
7-S Model A Systemic Approach to Improving Organizations
The 7-S model is a tool for managerial analysis and action that provides a structure with which to
consider a company as a whole, so that the organization's problems may be diagnosed and a
strategy may be developed and implemented.
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The 7-S diagram illustrates the multiplicity interconnectedness of elements that define an
organization's ability to change. The theory helped to change manager's thinking about how
companies could be improved. It says that it is not just a matter of devising a new strategy and
following it through. Nor is it a matter of setting up new systems and letting them generate
improvements.
----Shared values are commonly held beliefs, mindsets, and assumptions that shape how an
organization behaves its corporate culture. Shared values are what engender trust. They are an
interconnecting centre of the 7Ss model. Values are the identity by which a company is known
throughout its business areas, what the organization stands for and what it believes in, it central
beliefs and attitudes. These values must be explicitly stated as both corporate objectives and
individual values
Strategy is a plan of an organization formulates to reach identified goals, and a set of
decisions and actions aimed at gaining a sustainable advantage over the competition. Systems
define the flow of activities involved in the daily operation of business, including its core
processes and its support systems. They refer to the procedures, processes and routines that are
used to manage the organization and characterize how important work is to be done. Style
refers to the cultural style of the organization, how key managers behave in achieving the
organization's goals, how managers collectively spend their time and attention, and how they use
symbolic behavior. How management acts is more important that what management says.
26


Staff refers to the number and types of personnel within the organization and how companies
develop employees and shape basic values.
Skills refer to the dominant distinctive capabilities and competencies of the personnel or of
the organization as a whole.
---Structure is the organizational chart and associated information that shows who reports to
whom and how tasks are both divided up and integrated. In other words, structures describe the
hierarchy of authority and accountability in an organization, the way the organization's units
relate to each other: centralized, functional divisions (top-down); decentralized (the trend in
larger organizations); matrix, network, holding, etc. These relationships are frequently
diagrammed in organizational charts. Most organizations use some mix of structures - pyramidal,
matrix or networked ones - to accomplish their goals.

RESEARCH METHODOLOGY
TITLE OF THE PROJECT
A Study on Retail Banking inIndia
STATEMENT OF THE PROBLEM
As there are immense opportunities of the retail banking in India. This project is on the issues
and challenges in the retail banking because of the competition of the various banks and the
customer satisfaction of the services which the banks are providing and at the same time to solve
the complaints of the customer and maintaining the sound relationship for the future and by this
way to estimate the future growth of the retail banking.
OBJECTIVES OF STUDY
study the issues and challenges in retail banking.
To study the recent trends in retail banking.
To ensure high satisfaction level and reduce percentage of complaints of customer in
retail banking.
27


To estimate the future growth of Indian retail banking.
To understand Optimization of retail banking channels.
To suggest strategies for improvement in Customer Service.
OPERATIONAL DEFINITION
Retail banking refers to banking in which banking institutions execute transactions directly with
consumers, rather than corporations or other banks. Services offered include: savings and
checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth. And to
know about the customers perceptions about the different products of the bank like current
account, savings account, FD, Smart Saver, Smart Access and others.



DATA COLLECTION
There are several approaches of data collection. The primary sources of data collection are done
through: -
Observations and Questionnaire
QUESTIONNAIRE
Questionnaire is the method of data collection, which is very much popular, particularly in big
cities. Different modes of questions are put up on the paper and the particular universe, on which
the research is conducted, are asked to fill their responses.
The Secondary source includes data collection through: Magazines, Journals, Books,
Newspapers etc. and Indian Overseas Banks Website.
SAMPLING TECHNIQUE
(a) Sampling Unit: -
28


Walk in customers and the company database of high ended customer.
(b) Sample Size:-
Sample size for this project was restricted to 50 respondents. Since it was not possible to cover
the whole universe in the available time period, it was necessary for me to take a sample size of
50 respondents.
(c) Sampling Method:-
There are three methods of sampling:-
1. Probability Sampling
2. Non-Probability Sampling
3. Quota
For this research work Non- Probability Convenience Sampling has been chosen because time
limit for the completion of the work is limited.
Area of Study - Patna, Bihar
Duration - 2 months (13th May 2014 16th July 2014)
DATA COLLECTION METHOD
Data for the present study is collected from two sources:
1. Primary Data:
The data are collected directly from the universe by conducting interviews, etc. these are the
original sources from which the researcher directly gathers data which are not previously
referred. All the people from different profession were personally visited and interviewed. They
were the main source of primary data. The method of collection of primary data was personal
direct interview through a structured questionnaire.
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The primary data was collected by means of survey. Questionnaires were prepared and
customers of Indian Overseas Bank were approached to fill up these questionnaires. The filled up
information was later analyzed to obtain the required information.
2. Secondary Data:
The data are collected from the secondary sources such as magazines, journals, etc. These
sources consist of already variable data in the form of statements, and reports, which may
include sensory reports, financial statements of the company, reports of governments
departments, etc.
It was collected from internal sources. The secondary data was collected on the basis of
organizational file, official records, newspapers, magazines, management books, preserved
information in the companys database and the website of the company.
Both Primary and Secondary sources was used for data collection.
For primary source, Questionnaire was used. For secondary source Internet, Books and
Newspapers etc were used.
RESEARCH DESIGN
Research design is simply the framework or plan for a study, used as a guide in collecting and
analyzing data. There are three types of Research Design:-
1. Exploratory Research Design
2. Descriptive Research Design
3. Casual Research Design
For the study, Exploratory Research Design was undertaken to classify the investors on their risk
and return profile.
PLAN OF ANALYSIS
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The data obtained from the structured questionnaire was interpreted and recorded. The table and
graph were constructed using data from the questionnaire through simple techniques like
average, percentage, etc. which was then used for analysing the acquired data.
LIMITATIONS
Designing own and new financial products is very costly and time consuming for the
bank.
Customers now-a-days prefer net banking to branch banking. The banks that are slow in
introducing technology-based products, are finding it difficult to retain the customers
who wish to opt for net banking.
Customers are attracted towards other financial products like mutual funds etc.
The volume of amount borrowed by a single customer is very low as compared to
wholesale banking. This does not allow banks to exploit the advantage of earning huge
profits from single customer as in case of wholesale banking.
Though banks are investing heavily in technology, they are not able to exploit the same
to the full extent.
OPPORTUNITIES AND CHALLENGES
Retail banking has immense opportunities in a growing economy like India. As the growth story
gets unfolded in India, retail banking is going to emerge a major driver. How does the world
view us? The BRIC report is viewing India as an economic superpower. A.T. Kearney, a global
management-consulting firm, recently identified India as the second most attractive retail
destination of 30 emergent markets.
The rise of Indian middle class is an important contributory factor in this regard. The percentage
of middle to high-income Indian households is expected to continue rising. The younger
population not only wields increasing purchasing power, but as far as acquiring personal debt is
concerned, they are perhaps more comfortable than previous generations. Improving consumer
purchasing power, coupled with more liberal attitudes towards personal debt, is contributing to
Indias retail banking segment.
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The combination of above factors promises substantial growth in retail sector, which at present is
in the nascent stage. Due to bundling of services and delivery channels, the areas of potential
conflicts of interest tend to increase in universal banks and financial conglomerates. Some of the
key policy issues relevant to the retail-banking sector are: financial inclusion, responsible
lending, and access to finance, long-term savings, financial capability, consumer protection,
regulation and financial crime prevention.








RETAIL BANKING : ADVANTAGES AND DISADVANTAGES
Retail banking has inherent advantages outweighing certain disadvantages. Advantages are
analysed from the resource angle and asset angle.
RESOURCE SIDE
Retail deposits are stable and constitute core deposits.
They are interest insensitive and less bargaining for additional interest.
They constitute low cost funds for the banks.
Effective customer relationship management with the retail customers built a strong
customer base.
Retail banking increases the subsidiary business of the banks.
ASSESTS SIDE:
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Retail banking results in better yield and improved bottom line for a bank.
Retail segment is a good avenue for funds deployment.
Consumer loans are presumed to be of lower risk and NPA perception.
Helps economic revival of the nation through increased production activity.
Improves lifestyle and fulfils aspirations of the people through affordable credit.
Innovative product development credit.
Retail banking involves minimum marketing efforts in a demand -driven economy.
Diversified portfolio due to huge customer base enables bank to reduce their dependence
on few or single borrower.
Banks can earn good profits by providing non fund based or fee based services without
deploying their funds.




DISADVANTAGES
Designing own and new financial products is very costly and time consuming for the
bank.
Customers now-a-days prefer net banking to branch banking. The banks that are slow in
introducing technologybased products, are finding it difficult to retain the customers who
wish to opt for net banking.
Customers are attracted towards other financial products like mutual funds etc.
Though banks are investing heavily in technology, they are not able to exploit the same to
the full extent.
A major disadvantage is monitoring and follow up of huge volume of loan accounts
inducing banks to spend heavily in human resource department.
Retail Banking P a g e | 63
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Long term loans like housing loan due to its long repayment term in the absence of
proper follow-up, can become NPAs.
The volume of amount borrowed by a single customer is very low as compared to
wholesale banking. This does not allow banks to to exploit the advantage of earning huge
profits from single customer as in case of wholesale banking.
Trends in Retail Banking
Growing a retail banking business is becoming increasingly challenging. The yield curve is
flattening, reducing banks net interest margin. Competition is intensifying, as new, non-
traditional players enter the retail banking space. And consumer preferences for financial
products, payment methods and distribution channels continue to evolve, providing revenue
opportunities, but also introducing new operational challenges.
The changing dynamics of the retail banking business have significant implications for financial
institutions. In order to successfully compete in this environment, banks must provide a
distinctive customer experience and offer innovative product solutions in order to differentiate
their value proposition in the marketplace.
Key trends in retail Banking are:
1. Bifurcation of the retail banking business:
National- Consolidate- Credit Cards
Home Equity Loans Mortgages
Local- Fragmented- Deposits
Installment Loans & Small Business Loans
2. Lack of differentiation in retail financial services:
Many financial institutions are struggling to differentiate their value propositions in the
retail banking market.
Free checking is now offered by all or most financial institutions.
Most institutions no longer charge for online banking or online bill payment.
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Extended branch hours are increasingly common in many markets, as banks seek to
increase customer convenience.
3. Proliferation and growth of electronic payments.
4. Increasing demand for ATM access.

Strategies for ensuring high Customer Satisfaction
Set service expectations and standards of behaviour - this means that managers must set
clear service expectations and standards of behaviour, beginning with defining "excellent
service."
Identify and eliminate barriers and obstacles. Policies that do not make sense; procedures
that get in the way; and rules, norms that make satisfying customers difficult all need to
be eliminated to successfully improve service.
Learn and develop skills. Clearly, personnel at all levels should learn new skills related to
service excellence and serve the customer.
The customer database available with the banks is the best source of their demographic
and financial information and can be used by the banks for targeting certain customer
segments for new or modified product. The banks should come out with new products in
the area of securities, mutual funds and insurance.
As most of the banks are offering retail products of similar nature, the customers can
easily switchover to the one, which offers better service at comparatively lower costs.
The quality of service that banks offer and the experience that clients have, matter the
most. Hence, to retain the customers, banks have to come out with competitive products
satisfying the desires of the customers at the click of a button.
Retail customers like to interface with their bank through multiple channels. Therefore,
banks should try to give high quality service across all service channels like branches,
Internet, ATMs, etc.
Listen to customers, Measurement of customer satisfaction can be a powerful way to
improve service if the feedback is not focused on punishment.
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Managers need to help staff hear, first hand, how they are doing. For this feedback to be
effective, however, it must be tied to specific targets and goals and needs to be frontline
driven.
Reinforce and support continuous improvement. The real challenge is keeping the
energy, learning, and improving alive.

SUMMARY OF FINDINGS
94% of Customers are Happy with Brach timing and they believe it is very good.
98% of Respondents like the Brach ambience and Layout and find it friendly.
There is Tremendous change in Bank Segmentation, as per Bank officials IOB is having
around 30%-40% of its customers above the age of 60. But in Survey 94% of the
Respondent were below 45 Years.
94% of respondents responded that Branch personnel had been very helpful and
courteous
86% of the Customers are Happy with the Minimal time at Teller Counter.
94% of the Customers are Happy with Smooth and Error Free Transactions.
88% of the Respondent are Happy with good customer relation and quick services.
98 % of the Respondent feels satisfied cooperation of the bank employees in processing
and helping them in documentation, services and problem faced by them in banking
issue.
84% of Respondent are happy with Turnaround Time (TAT).
36% and 50% of the Respondent were over satisfied and satisfied respectively with
Overall level of Satisfaction.




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SUGGESTIONS & RECOMMENDATIONS:
Suggestions are always considered to be the most important part of any project report because
for every pros; there is cons associated with and to reduce the effect of latter, following
suggestions must be taken into consideration in regard to retail banking.
The employees can do more marketing activities to improve their presence in the minds
of their potential target market. As we see that media coverage of IOB is not so strong,
hence for the maximum market coverage and to attract new customer they should go for
mass media coverage like TV, Radio etc.
42% of the Respondent are unhappy with E-Products so bank personnel should improve
this issue because customer is a source through which business can be increase and
satisfy customers is a source to create more customers.
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Bank should introduce/ Open new ATMs Especially in Bihar because there is much
Scarcity of IOB-ATMs.
24% of the Respondent was not fully satisfied with Branch Personnel cooperation in
sorting out problems faced in banking issue, IOB should work on this because CRM is
the major aspect of any Business.
As we seen percentage of non-performing loan is increasing year by year that means their
current strategy regarding recovery of loan is not working appropriately. To recover the
non-performing assets the current strategy need to be executed and monitored properly.
Since day by day the requirements and demands of public is increasing so it is quite hard
to provide full range services. So, it is required to put more attention toward the
expansion of branch network as well as ATM outlets
The Branch personnel should listen to customer patiently and should be able to respond
to their queries and clarifications because some customer is new to some of the bank
services and until and unless they will come to know about those services they will be not
be satisfied.
Information in the Bank Statement should be more clear, easy to understand and
adequate.

Along with customer satisfaction employees participation must be kept active by
appraising their salary as well as their work.
Frequently customers must be kept delighted by providing them regards and by
maintaining customer relationship so that their interest can be kept maintained.
The Indian Overseas Bank should focus on business and service portfolio for a reputation
of being niche players in the industry.
The bank should concentrate on few reliable high net worth companies and individuals
rather than cater to the mass market.
As 10% customer response is not good for the clarification of the queries response
towards them so bank personnel should improve this issue because customer is a source
through which business can be increase and satisfy customers is a source to create more
customers.
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As it is only 04% respondent said that sometime there was a error in the transaction
happened so to avoid these kinds of errors should be avoided because it is unnecessarily
results in wastage of time for both staff members and service rendered.
There should be increase in the number of events organize by bank because it is a
opportunity for the bank to introduce new products and services and at the same time it is
a open opportunity for the customer to come forward and suggest its views which might
prove to add the values for the bank because 10% customer still not have a good
response.
Communication with the customer should be improved and increased so that bank can
easily response towards them and in result the customer would be satisfy and no question
that they will recommend the Indian Overseas Bank to their friends and relatives because
only 2% of customer are not responding in a positive manner.




CONCLUSIONS FUTURE GROWTH
The project aims to study the retail banking operations of India. The study was very fruitful, it
yielded the desired results, helped me understand the retail banking. The study also helps in what
are the customer opinions towards operations of bank & its various product and services.
Any serious discussion of the future of the retail banking industry eventually raises a basic
question: will future customers still need retail banks? The answer, it turns out, depends on banks
themselves. With technology and non-blank businesses providing new options for safeguarding
and managing their finances, customers will continue to depend on banks only as long as banks
can provide service and value that cannot be found anywhere else.
The need to become highly customer focused has forced the slow-moving public sector banks to
adopt a fast track approach. The unleashing of products and services through the net has
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galvanized players at all levels of the banking and financial institutions market grid to look a new
at their existing portfolio offering. Conservative banking practices allowed.
Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now
quoting at higher valuation when compared to banks in other Asian countries (viz. Hong Kong,
Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets
(NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with
efficient branch networks focus primarily on the high revenue niche retail segments.
The Indian banking has finally worked up to the competitive dynamics of the new Indian market
and is addressing the relevant issues to take on the multifarious challenges of globalization.
Banks that employ IT solutions are perceived to be futuristic and proactive players capable of
meeting the multifarious requirements of the large customers base.
Despite stiff competition among banks operating in both domestic and overseas, many has
achieved satisfactory progress in areas of its operations. The bank hopes to achieve a reasonable
level of progress in all areas of operations to achieve their objective and for wealth
maximization. Indian Banks has a great opportunity to increase their market potential in the
present market situation.

LEARNING EXPERIENCE
The dissertation is to define the retail banking and regarding the general services of bank. The
study was very fruitful, it yield the desire result, helped me to understand the banking services
better. The study also yields what are the factors that banking is looking forward for the
customer.
The Indian banking has come from a long way from being a sleepy business institution to a
highly proactive and dynamic entity. This transformation has been largely brought about by the
large dose of liberalization and economic reforms that allowed banks to explore new business
opportunities rather than generating revenues from conventional streams (i.e. borrowing and
lending). The banking in India is highly fragmented with 30 banking units contributing to almost
50% of deposits and 60% of advances.
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Under the ambit of the nationalized banks come the specialized banking institutions. The bank
gives great importance towards customer satisfaction. The senior staffs with their busy schedule
try to advice the customer how to invest in better way. The employees in the bank are well
behaved and give a great deal of satisfaction to see them how they approach their customers.
The bank plays an important role not only to fulfil their duties towards customer but also to
understand them better regarding what they want and how to maximize the return on the
investment.
The bank has set up separate department to impart training program for the employees. The
biggest achievement is the implementation of core banking solution.






ANNEXURE
QUESTIONNAIRE (survey done through various account holders from IOB)
Dear Valued Customer,
Your candid feedback on service standards is very important for us to help you even better.
We would like to know a little more about you:-
Your Name: _________________________________AGE_____________
Your Customer Id/A/c No. (Optional): _____________OCCUPATION______
Your Branch: ________________________________________________
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Your E-mail id: ______________________________________________
Your Contact details: __________________________________________
How frequently do you visit the Branch (in a month)? ________________
1. Do you have any Bank Account? If yes then in which Bank?
( ) Saving A/c ( ) Current Account ( ) Loan Account^^^ ( ) Other Account
( ) SBI ( ) PNB ( ) IOB ( ) HDFC ( ) ICICI ( ) Others
^^^ If loan in Account in IOB then which type of Loan?
( ) Housing Loan ( ) Vehicle Loan ( ) Business ( ) Others
2. What kind of service or services do you expect from IOB?
( ) Quick Response ( ) Good Customer Relations ( ) Schemes better than other Banks
( ) Extra Facility for Existing Customer


3. What influence you to come and avail services from IOB?
( ) Advertisement ( ) Friend/Relative recommendation ( ) Brand Value
( ) Govt. of India Undertaking
4. The Branch timings (10:30 am to 4:30 pm from Monday to Friday and 10:30 am to 1:30 pm
on Saturday) are convenient?
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be Better
6. Is the branch ambience & layout is very friendly?
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be Better
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7. Is the waiting time at the Teller Counter was minimal?
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be Better
8. Is the transactions done by us have been smooth & error free?
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be Better
9. Is IOB looks into the feedback provided by you and takes necessary action if required?
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be Better
10. How was your experience while using IOB E-Products?(likeATM, Internet/Mobile
Banking, etc)
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be Better
11. How do you find IOB employees provide you good customer relation and quick services?
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be better
12. How do you find the processing procedure while availing different services provided by
IOB?
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be better
13. Is the branch personnel have been very helpful and courteous?
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be Better
14. How do you find the cooperation of the bank employees in processing and helping you with
documentation, services and problem faced by you in banking issue ?
( ) Excellent ( ) Good ( ) Average ( ) Could be better
15. Are you happy with the TAT (Turn Around Time) post request ? ***
( ) Excellent ( ) Good ( ) Satisfactory ( ) Could be Better
16. Your overall level of satisfaction with IOB?
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( ) Over satisfied ( ) satisfied ( ) Not Dis-satisfied ( ) below satisfaction













BIBLIOGRAPHY
BOOKS:
Risk Management, (Dr. S.B. Verma) Deep & Deep Publication, Delhi
Dynamics of E-Commerce (Dr. S.B. Verma) Deep & Deep Publication, Delhi
Retail Banking (By Indian Institute of Banking and Finance), Macmillan
Retail Marketing Tool kit ( 3rd Edition Published by IOB, Chennai)
Retail Management (By Bajaj Tulsi Shrivastva), OXFORD, University Press
Report of Sheetal on Credit Management for IOB.
INTERNET:
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www.iob.in
www.sbi.in
www.rbi.org.in
www.wikipedia.org
www.moneycontrol.com
www.wikipedia.org/Mckinsey7S_Framework
www.mindtools.com/pages/article/newSTR_91.htm
www.bankbazar.com
www.profit.ndtv.com/stock/indian-overseas-bank_iobf/inancials